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Identifying and Preventing Check Fraud

Starting a business entails hundreds, if not thousands of hours of hard work—and much of that work can be erased with just one instance of fraud. That’s why it’s critical for business owners to educate themselves and their employees on how to identify and prevent fraud.

This article presents tips for identifying and preventing one of the most common types of fraud: check fraud. Check fraud is one of the largest challenges facing businesses and financial institutions today. With the advancement of computer technology, it is increasingly easy for criminals, either independently or in organized gangs, to manipulate checks and deceive innocent victims into expecting value in exchange for their money. It can be perpetrated as easily as someone stealing a blank check from your business, searching for a canceled or old check in the garbage; or removing a check you have mailed to pay a bill from the mailbox.

Common Types of Check Fraud Facing Businesses


For a business, forgery typically takes place when an employee issues a check without proper authorization. Criminals may also steal a check, endorse it, and present it for payment at a business.


Counterfeiting can either mean wholly fabricating a check or simply duplicating a check with advanced color photocopiers.


Alteration primarily refers to using chemicals and solvents to remove or modify handwriting and information on the check. When performed on specific locations on the check, such as the payee's name or amount, it is called-spot alteration; when an attempt to erase information from the entire check is made, it is called-check washing.

Check Kiting

Check kiting is opening accounts at two or more institutions and using "the float time" of available funds to create fraudulent balances. This fraud has become easier in recent years due to new regulations requiring banks to make funds available sooner, combined with increasingly competitive banking practices.

Business Email Compromise

Criminals hack into a business's email system and send fraudulent checks to vendors or employees, who then deposit them into their own accounts.

How Can I Protect My Business Against Check Fraud?

Learn How to Spot Fraudulent Checks

The first step to protecting your business against check fraud is to pay close attention to checks you receive from customers and associates. Signs of a bad check may include:

  • The check lacks perforations.
  • The check number is missing.
  • The check number is low (101 up to 400 on personal checks or 1001 up to 1500 on business checks). Most bad checks are written on accounts less than one-year-old. [1]
  • The type of font used to print the customer's name looks different from the font used to print the address.
  • Additions to the check (e.g., phone numbers) have been written by hand.
  • The customer's address is missing.
  • The address of the bank is missing.
  • There are stains or discolorations on the check possibly caused by erasures or alterations.
  • The numbers printed along the bottoms of the check (called Magnetic Ink Character Recognition, or MICR, coding) are shiny. Real magnetic ink is dull and non-glossy in appearance.
  • The MICR encoding at the bottom of the check does not match the check number.
  • The MICR numbers are missing.
  • The MICR coding does not match the bank district and the routing symbol in the upper right-hand corner of the check.
  • The name of the payee appears to have been printed by a typewriter. Most payroll, expenses, and dividend checks are printed via computer.
  • The check lacks an authorized signature.

Take Precautions to Protect Your Mail

Business owners have several options available to prevent theft of important financial documents from their incoming and outgoing mail. Just be sure to check with your postal carrier before implementing any solutions that might affect mail delivery:

  • Lock your mailbox: If your postal carrier is willing, you can buy a padlock for your mailbox. Place it unlocked inside your mailbox. When the carrier delivers your mail, he or she locks the box.
  • Replace a wall-mounted mailbox with a mail slot: If you have door-to-door delivery and a door leading to a secure part of your business, like a back office, ask your local post office if you can replace your mailbox with a mail slot on your door.
  • Buy a security mailbox: Heavy-duty metal boxes are available in both wall-mounted and free-standing models (the latter may be sunk in concrete to prevent vandalism.) Security mailboxes typically have a slot for the carrier to deliver mail. Mail goes down a chute and into a locked compartment.
  • Get a post office box: If theft is a concern, the cost of renting a post office box may be worth the investment.
  • Consider a parcel locker: If you receive frequent shipments of valuable goods, you may wish to invest in a parcel locker. If you use multiple delivery services, however, you'll need one for postal deliveries and a separate locker for others, such as Federal Express or United Parcel Service.
  • Pick up mail promptly: Mail thieves may follow carriers on their routes, striking within minutes after delivery. Pick up mail as soon after delivery as possible.

Keep these tips in mind to help protect yourself against check fraud. To learn more about identifying and preventing check fraud, please review this article from Impaxeon. To access more fraud prevention resources, please visit our eFraud prevention page.